Changes to funding rules for apprenticeships

CIPD HR-inform. Croner.

Stacie Cheadle, technical writer at Croner, looks at what employers need to know about hiring apprentices, employee status and funding changes effective from 1 August.

August is a big month. With various qualifications being awarded, significant decisions about the future are being made by young people. For many, of whatever age, an apprenticeship is a serious option, and many accountancy firms do already hire a sizeable number of apprentices training for professional qualifications.

According to official figures, a total of 308,770 apprenticeships were started between August 2025 to April 202, up 8.7 % on the previous year.

With so many undertaking these courses, it’s important for employers to know the rules on apprenticeships and how they can take them on in their organisation.

Apprenticeships combine the benefits of acquiring knowledge from experts through workplace learning with classroom-style studies. The apprentice gains accountancy and finance qualifications and essential skills, along with a salary, while firms can secure some funding for the training of the accountants of the future.

Taking on an apprentice

Before taking on an apprentice, decisions need to be made on what apprenticeship will be offered. An appropriate apprenticeship agreement will need to be put in place, as well as relevant policies, procedures and risk assessments. The form of the agreement will depend on whether the apprenticeship is under a framework (in Wales) or a standard, the equivalent in England.

A new format apprenticeship agreement should be used in England. This must contain the normal elements required in an employment contract and the amount of off-the-job training to be completed. It must also set out the start date, duration and end date of the practical period (the training period), as well as the actual duration of the entire apprenticeship.

In Wales, apprentices work under an old-style apprenticeship agreement, which in addition to standard employment terms must include a statement of the skill, trade or occupation the apprentice is being trained for under the qualifying apprenticeship framework. It must also state that it is entered into in connection with a qualifying apprenticeship framework, and that it is governed by the law of England and Wales, but there is no requirement to include off-the-job training in the agreement itself.

In England and Wales, apprentices have ‘employee status’, which means they fall under the normal rules for employees (save for documentation, as outlined above).

In Scotland apprentices work under a contract of apprenticeship and have a special status, which means terminating them before the end of the apprenticeship is subject to stricter rules and potentially significant financial consequences.

Changes for apprenticeships starting from August 2026

The 2026/27 apprenticeship funding rules, overseen by the Department for Work and Pensions (DWP) and released every July, apply to apprenticeships starting between 1 August 2026 and 31 July 2027.

The rules change most years, and it’s essential to apply the rules from the relevant year to apprentice employees.

The 2026/27 rules clarify that:

• There is a minimum number of hours of off-the-job training apprentices must complete for each standard. This information can be found on the Skills England website.

• Employers must keep their PAYE information in their government apprenticeship service account up to date.

• The individualised learning records, primarily managed by further education (FE) providers, and planned end date must not change once submitted, even if the apprenticeship agreement is extended (unless there has been a break in learning and subsequent restart).

• Off-the-job training and active learning does not include English and maths standalone qualifications, even if the apprentice requires it in order to do their work.

In addition, at the end of the apprenticeship programme, the employer, provider and learner must agree that the content of the training plan has been delivered - this can either be recorded in the training plan or in the provider’s gateway review process. Where an alternative progress review timetable has been agreed, this should be done in advance, and reviews must be no more than six months apart.

A number of funding changes affecting the apprenticeship levy apply from 1 August 2026, including;

• The government no longer makes a top-up payment of 10% and this is no longer added to new funds entering apprenticeship levy accounts.

• For apprenticeships starting from 1 August 2026:

  • where a levy payer has insufficient funds in their apprenticeship service account, the employer co-investment rate is 25%.

  • where an employer does not pay the levy and the apprentice is aged 25 or above (at the start of their apprenticeship training), the employer co-investment rate is 5%.

  • where an employer does not pay the apprenticeship levy, the government will fund all the apprenticeship training and assessment costs (up to the funding band maximum) for those apprentices aged between 16–24 years old (or 15 years of age if the apprentice’s 16th birthday is between the last Friday of June and 31 August) at the start of their apprenticeship training.

For apprenticeships starting from October 2026, non-levy paying employers will be able to get a hiring payment of £2,000 when recruiting new apprentices aged 16–24. This is provided that the apprentice has started their job with the employer in the past three months.

The payment will be in two instalments, and the employer will be eligible for the first payment once the learner has completed the first 90 days of their apprenticeship. 

Takeaway

As the rules for apprenticeships change each year, it’s essential that employers take the time to review what they have in place each year before offering any new apprentices, and update as necessary. Working closely with the chosen training provider can help with that process.

By Stacie Cheadle, technical writer at Croner